Sangram Aglave, Contributing Editor, Businessworld caught up with one of the most people friendly executives you will come across, energetic, open cherubic and full of life, John Allessio, who also happens to be a key member of Red Hat executive leadership team. John Allessio has spent more than a quarter of a century, 27 plus years at IBM before he joined Red Hat in 2014. He has been with Red Hat since then and through the acquisition has an even greater responsibility to get a post-acquisition positive-sum dynamic going for IBM and Red Hat. The general optimism about the merger is further bolstered by having a long time IBMer in John and ex-IBMer Eric Shander as the CFO at Red Hat. There seems to be no reason to survey practitioner’s sentiment around the IBM acquisition after you’ve met John. All doubts and speculations one may have regarding IBM’s acquisition of RedHat will come to rest after you sense the deep commitment of IBM to preserve Red Hat’s independence and neutrality of its open source heritage. Red Hat closed the fourth quarter strong despite the news of the acquisition with total fourth-quarter revenue of $879 million, up 14% Y-o-Y with full FY 19 revenue of $3.4 billion, up 15% Y-o-Y. Not just that but the sum of total deferred revenue and ‘non-cancellable’ unbilled revenue stands at $4.1 billion dollars. These numbers speak of Red Hat as an enduring and performing organization and its culture and lot more about it than the mere testimony to the fact that open source can be profitable. We spoke with John on a wide range of topics.
Enterprise IT Sales model will not change
The current period in Enterprise IT can be best described by “the waves of Consumerization”. The uptake of Enterprise technology built by consumer internet companies has brought a paradigm shift to the Enterprise IT world. Most of this Enterprise technology was open sourced and therefore we asked John to know his thoughts on Consumerization and its impact on the quintessential Enterprise IT sales model. Enterprise IT sales model are the typical way Enterprise IT products and services are bought and sold. John said “The Enterprise software we offer solves some of the world’s most complex computing problems. Localization of prices to some extent has already taken place in the computing hardware market. Some consumer-oriented software products like Email as a service or a very commoditized SaaS market can look at the localization of prices but not all SaaS because some SaaS involves business process transformation. But Customers in the Enterprise software market cannot consume Enterprise IT products without the support from vendors and the vendor cannot be successful if they are not deeply engaged with the customers. That’s the reality of the Enterprise software world.”
Future of open source
We see most of the large proprietary software companies moving their proverbial aircraft carriers towards Cloud. The key facet of the Enterprise Cloud movement has been the adoption of open source. We asked John about the AGPL related conversation and he added prophetically “Large Enterprise IT vendors embracing open source but not contributing back to the core will naturally fall behind. How would you have the necessary skills to drive great customer experience if a Large Enterprise IT cloud company is not leading, driving and having a significant contribution. Followers may capitalize on some parts of the market but will never hit the most innovative and most challenging and early time to market positions.” Elaborating the reasons behind the success of Red Hat and juxtaposing the same with what
he sees competition doing, John added “Red Hat leads open source while most of the large Enterprise IT cloud vendors are using open source in their cloud services. Open source leaders make direct contributions to the core. Red Hat firmly believes that the industry is better if opensource exists. We fundamentally believe that the industry will solve more complex problems if we are based on an open source business model. Our philosophy is different and is often hard for other vendors to follow. The value of Red Hat is not defined by the code we ship into the market but by the value our customer experience when they solve their problems using our code. This is a completely different philosophy as most companies or virtually all start with the proprietary model but soon, they realize this model creates limitations.”
Forking code for Custom Extensions
Open source development massively disincentivizes forking of code to create custom extensions. The movement of the core with time means massive overheads in moving the customer extensions. John said, “it’s always in the best interest to contribute back to the source, one to avoid costs but also to benefit from the wisdom of the crowd’s watershed.” Sajeeve Bahl, Senior Director & Head of APAC Services at Red Hat said “Open source is a key part of Customer strategy today as only within open source developers are trying to outsmart themselves eventually consecrating a lot of creativity into the open source core. The best brains in the world”. Co-incidentally Cloudera recently announced that they will open source all their future innovation taking the same line as Red Hat and Horton Works which they acquired. This trifecta along with other major open source vendors we sincerely hope will preserve protect and grow the open source movement.
Approaching Open Source through Red Hat
John said “Open source community creates projects and it is not necessarily productized and made ready to consume for the Enterprise. Red Hat brings a product lifecycle approach to Open source through certifications, QA processes, engineering talent and consulting services. Red Hat understands that customers of open source need the hardening of an Enterprise product. We help our customers consume open source software and deploy it successfully.” When asked does Red Hat contribute all the code they create with the community, John unequivocally confirmed “each and every time. Open source customers have a choice to go with the community or outsource their open source needs to a vendor such as Red Hat. We also run training and talent development programs for our Customers.”
Will Cloud consolidate to 3-4 vendors?
John said “SaaS will not consolidate but they will outsource their needs to IaaS and PaaS. For the foreseeable future at the IaaS level, there will still be smaller cloud providers who will provide certain niche capability and value. There will continue to be a market for Red Hat certified cloud and service providers beyond the large cloud vendors.” Sajeeve Bahl added “Data localization and cost savings are driving customer data center choices.”
Open Source brings a culture of Innovation
Openness in the open source culture is all about giving. When asked what a smart CIO should be looking for, John said “I don’t think if the title is relevant anymore. CIOs are leading business process transformation and employing their business acumen in the process. They are also responsible for keeping the lights on and therefore looking at automating or outsourcing parts which can free them to
engage in digital transformation discussions within their business.” He further added, “deploying open source software naturally opens the performing organization to experiment leading to a culture of innovation.”
On Meaningful IT jobs
Employees of an Enterprise IT company often see themselves divided by their specialization into departments such as engineering, product management, sales, marketing, consulting, support, etc., We asked John if this division is the reason behind the lack of meaning felt by an employee of IT companies. This is what John said “This is where Leadership matters. This is where a few individuals can make a lot of difference. I pushed myself to take up different jobs supporting the customer journey in my career path. What is important here is I pushed it and I did not wait for an HR person to do that for me.”
Open source has a structure
Joe Freeman in her famous essay “Tyranny of the structureless” speaks of nature of authority and downsides of power in a structureless movement of the society. Some of the contemporary thinkers have tried to apply Joe Freeman’s template to the open source movement but I think it is unnecessary and also largely invalid till we have vendors like Red Hat whose methods as we see don’t lead to hegemony or a class system and division on elitist grounds among its developer community. Are the grand old proprietary software companies building systems today? Did they forget the necessary skills to build systems? Whom do we see building systems today and where are they building them? I think these are very important questions we should ask ourselves. Very rarely we see two companies come together with the way IBM and Red Hat have. If anything, this co-mingling of two distinct philosophies of software development should be celebrated by one and all. All signs so far point to open source as the de facto operating model for building Enterprise computing software.